Acquisition believed to offer Vedanta low risk exposure to gold

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Golden deal


As part

of this transaction, Vedanta has entered into an agreement to acquire the entire share capital of Twin Star International Ltd, the holding company that has 55 per cent stake in Sterlite Gold's common shares, for C$37.68 million in cash representing an imputed price of C$0.258 per Sterlite Gold common share.

Mumbai, June 13

Vedanta Resources plc has announced that it has entered into an agreement to acquire a controlling interest in Sterlite Gold Ltd for a total consideration of Canadian $68.45 million (around Rs 285 crore).

It plans to make a cash offer to acquire, directly or indirectly, all of the outstanding common shares of Sterlite Gold, a gold mining company listed on the Toronto Stock Exchange. At C$68.45 million, the deal works out to C$0.258 per Sterlite Gold common share.

Enters pact

As part of this transaction, Vedanta has entered into an agreement to acquire the entire share capital of Twin Star International Ltd (TSI), the holding company that has 55 per cent stake in Sterlite Gold's common shares, for C$37.68 million in cash representing an imputed price of C$0.258 per Sterlite Gold common share.

Sterlite Gold's principal assets are located in Armenia and include an open pit gold mine at Zod and a gold processing plant at Ararat.

In October 2004, Sterlite Gold announced measured and indicated resources estimated at 2.1 million ounces.

"Vedanta believes that the acquisition offers an attractive low risk exposure to this commodity and provides the opportunity to deploy its proven project development skills,'' a news release said.

Advantage Vedanta

Zod has the potential to be a world-class mine, with existing development potential in addition to exploration upside. The acquisition will also provide Vedanta with the expertise to take advantage of other gold opportunities, particularly in India, the release said.

Sterlite Gold offer

The board of directors of Sterlite Gold appointed a committee of independent directors to review the terms of the proposed Sterlite Gold Offer. The Sterlite Gold Independent Committee retained PricewaterhouseCoopers to prepare a valuation of the Sterlite Gold common shares in compliance with Canadian securities laws, including Ontario Securities Commission Rule 61-501. PwC has advised Sterlite Gold board and the committee that the offer price is within its valuation range of C$0.24 to C$0.275 per share.

The company's board, on the committee's recommendation, has unanimously approved the offer and has agreed to recommend that the shareholders of Sterlite Gold tender their common shares to the Sterlite Gold Offer.

Offer conditions

The offer will be subject to customary conditions including all regulatory approvals having been obtained and acceptance by at least 662/3 per cent of the company's total number of issued and outstanding common shares, and not less than a majority of the total number of issued and outstanding Sterlite Gold common shares, excluding any common shares that may not be included as part of the minority approval of a second step transaction.

Vedanta and Sterlite Gold are under common control. Volcan Investments Ltd owns 53.76 per cent of the ordinary shares of Vedanta and 100 per cent of the shares of TSI, the controlling shareholder of Sterlite Gold. The transactions comprising the TSI acquisition and the Sterlite Gold Offer therefore constitute a related party transaction under the Listing Rules of the UK Listing Authority and an insider bid under Canadian securities laws, including Rule 61-501. Vedanta formed a special committee of directors who are independent of Volcan to consider and supervise the making of the TSI acquisition and Sterlite Gold Offer.

(This article was published in the Business Line print edition dated June 14, 2006)
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